OPEC heavyweight Saudi Arabia believes it is "premature" for the cartel to decide to reduce crude oil production, a Saudi oil source told AFP on Wednesday.
"It is premature at the moment to envisage a reduction" in the oil cartel's output, the source said, asking not to be identified.
"But the kingdom will approve a new reduction in production if it is proven that demand for crude will fall soon or after March and bring prices down below $22 a barrel.
Such a reduction "will only be decided after a market study and consultations with OPEC countries and other producers such as Norway and Mexico," he added.
Riyadh, the world's top exporter, "will take no decision before such consultations, but is ready to approve a new reduction if the market was threatened," the source said.
OPEC general secretary Ali Rodriguez of Venezuela said Monday that a reduction of up to one million barrels per day (bpd) could be agreed at the cartel's next meeting in Vienna on March 17.
The Saudi reaction came after the Wall Street Journal on Tuesday quoted sources at the Organization of Petroleum Exporting Countries who were "familiar with Saudi thinking on oil matters" saying Riyadh felt further cutbacks were necessary to balance supply and demand.
The Saudi source, while linking any cut in output to a fall in demand, played down the importance of a report by the International Energy Agency (IEA) last week which said that growth in world demand will be sharply undercut by a slowdown in the global economy during 2001.
"World oil demand growth in 2001 has been cut by 140,000 bpd to 1.5 million bpd," the Paris-based agency said in its monthly report, which warned of turbulent markets ahead.
"Oil demand figures since October have fallen below expectations. Even January shows only modest growth, despite strong short-term substitution of oil for natural gas in North America, the report said.
OPEC cut output by 1.5 million bpd -- five percent of its total production -- from February 1 in order to underpin prices. But consuming countries have urged restraint, fearing that further cuts will result in a new price spiral.
In London, the price of oil remained steady on Wednesday morning as traders sat on their hands awaiting the weekly gauge of US stocks from the American Petroleum Institute (API).
Reference Brent North Sea crude for delivery in April was selling for $26.67 a barrel by late morning, against $26.62 the previous close.
An analyst with the GNI brokerage, Lawrence Eagles, said that could be some nervousness in the market before the API figures to be published late Wednesday.
Eagles said that although "people expect a cut from the OPEC ... we have to wait until the last few days (before the March meeting) to get any confirmation of that." - (AFP)
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